Stocks Fall After Disappointing Data

By THE ASSOCIATED PRESS

April 3, 2013

Weak reports on hiring and service industries helped send the stock market sharply lower on Wednesday, giving the Dow Jones industrial average its worst day in more than a month.

The Dow fell 111.66 points, or 0.8 percent, to 14,550.35, its biggest decline since Feb. 25. The Standard & Poor’s 500-stock index dropped 16.56 points, or 1.1 percent, to 1,553.69. Both indexes closed at nominal record highs the day before.

The stock market started 2013 with a rally as investors became more optimistic about the American economy, especially housing and jobs. The reports on Wednesday disappointed investors and came two days after news that manufacturing growth slowed unexpectedly last month.

“The market is overdue for a correction,” said Joe Saluzzi at Themis Trading. “I don’t think that the economy supports this type of a rally.”

The Nasdaq composite fell 36.26 points, or 1.1 percent, to 3,218.60.

In the bond market, interest rates dropped to their lowest levels since January. The 10-year Treasury note’s price rose 13/32, to 101 21/32, while its yield fell to 1.82 percent from 1.86 percent late Tuesday. The decline in yields means investors are beginning to seek safe haven in low-risk government debt.

The Russell 2000 index, which tracks small-company stocks, fell for a third straight day, dropping 1.7 percent. It’s now down 3.5 percent so far this week, far worse than the declines in the Dow of 0.2 percent and the S.& P. of 1 percent. That is another signal that investors may be becoming more bearish about the American economy.

Small-company stocks, which did better than the Dow and the S.& P. 500 in the first three months of the year, are more vulnerable to the economy than the larger companies in the Dow and S.& P. That is because they rely far more on domestic sales than global giants like I.B.M. and Caterpillar.

The Dow Jones transportation average, an index of 20 stocks including airlines like Delta and freight companies FedEx and UPS, fell more than 1 percent for a third straight day. The index, which is regarded as a leading indicator for the economy, has fallen 3.9 percent this week.

Service companies kept growing in March, but the expansion was less than economists were expecting. The Institute for Supply Management’s index of service companies fell to 54.4 from 56 a month earlier.

Separately, the payrolls processor ADP reported that employers added 158,000 jobs last month, down from February’s gain of 237,000. The ADP report is often seen as a preview for the government’s broader survey on employment, which is due to be released on Friday.

The slowdown in hiring was partly a result of construction companies holding back on adding new employees. That sent the stocks of home-builders lower. PulteGroup fell 85 cents, or 4.3 percent, to $19.01 and D.R. Horton dropped 57 cents to $22.84.

Even though the stock market started the second quarter lower, stocks typically add to their gains after ending the first quarter up, said Sam Stovall, an equity strategist at S&P Capital IQ. Using data going back more than 60 years, Mr. Stovall says that the S.& P. 500 has gained an average of 9 percent from April to December after rising in the first quarter.

Among the stocks on the move, Zynga rose 46 cents, or 15 percent, to $3.53 after the online game maker introduced two casino games in Britain.

Abercrombie & Fitch rose $1.74, or 3.8 percent, to $47.20, making it the biggest percentage gainer in the S.& P. 500. The company said late Tuesday that it planned to expand internationally and place greater emphasis on cost control.